The number of highly paid workers turning to individual voluntary arrangements (IVAs) has increased ten-fold thanks to the credit crunch, according to comparison site IVA.com.
IVA.com says the number of people earning more than £50,000 requesting IVAs, which allow people with unmanageable unsecured debt to pay back what they can before creditors write off the outstanding balance, rose from four last year to about 40 in the last two months.
Terry Balfour, director of IVA.com, attributes the rise to people living to their means and finding themselves unable to cope with the rising cost of debt.
He says: “[They have] been in highly paid job and they’ve bought a house and car and a lifestyle that matches that. If they lose their job and have to take a lower paid job, or run a business and that business starts struggling, they find themselves high and dry. The solution is to cut back. The problem we saw quite a lot is people go into fixed-term mortgages and [they’re] coming out of that.
“The level of enquiries from people whose finances would usually be regarded as water-tight indicates just how pervasive the current crisis is and points towards more casualties to come throughout the year.
“The average debt volume is around £25,000 – but we have seen people owing as little as £6,000 wondering whether to go down the IVA route."
He says he has received IVA requests from people earning more than £50,000 a year and even £100,000. Last year, he saw many customers with £30,000 of unsecured debt but he has recently seen people with as much as £100,000.
Balfour says most highly paid customers come from the construction industry or mortgage market as the number of home buyers falls. Mortgage lending for house purchase has fallen by almost a third over the past year, according to figures yesterday from the British Bankers Association (BBA).
IVA.com has also received requests from lawyers and investment bankers.
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